Liverpool also came from a goal down to beat Stoke City 2-1, Uruguay striker Luis Suarez scoring twice including a superb individual goal.
Daniel Sturridge grabbed an extra-time winner as Chelsea knocked out Everton 2-1 after both teams were reduced to 10 men while Gael Givet scored the decisive goal as Blackburn Rovers ousted Newcastle United 4-3 in an extra-time thriller.
Manchester City, who crushed Manchester United 6-1 at Old Trafford at the weekend, fell behind to a goal from Nenad Milijas on 18 minutes.
The Premier League leaders hit back though with goals from Adam Johnson, Samir Nasri, Edin Dzeko (2) and an own goal from Dorus De Vries in a 27-minute spell either side of half-time.
Wolves grabbed a second goal through substitute Jamie O'Hara.
Johnson was named man-of-the-match but City manager Roberto Mancini said there was still more to come from the England wideman.
"He played well but I think he can do more," the Italian told Sky Sports. "He has everything he needs to be one of the best wingers."
Johnson was at the heart of most of City's best attacks and swept the ball home from the edge of the area on 37 minutes before Nasri drove in a low strike to hand them the lead.
Wolves keeper De Vries fumbled the ball into his own net after Italian Luca Scapuzzi shot from close range while two flowing City passing moves ended with Bosnia striker Dzeko finding the net.
Chelsea took the lead at Goodison Park when Everton keeper Jan Mucha spilled a tame shot from Salomon Kalou. The hosts then equalised through a Louis Saha header after visiting keeper Ross Turnbull was sent off.
Both teams missed penalties and Royston Drenthe was red-carded for Everton in extra-time before Sturridge pounced to win the match from close range.
Blackburn went 2-0 up on Newcastle with a goal by Ruben Rochina and a penalty from Yakubu Aiyegbeni but Danny Guthrie pulled one back three minutes into stoppage-time and Yohan Cabaye scored an extraordinary equaliser three minutes later.
Morten Gamst Pedersen then netted a Blackburn free-kick. Peter Lovenkrands levelled again from the penalty spot before Givet popped up with a late winner.
